Matt Yglesias responds on the prospects of a budget-neutral public option:
I think this is best decomposed into two different questions. One is could a public option actually make money. The other is were a public option to prove financially non-viable, would it actually pass out of existence or would the government just prop it up with taxpayer dollars.
He goes on to say that it's not really valid to use the USPS or Amtrak as examples for what public option insurance may become. He's right here: it's not an apples-to-apples comparison because of a myriad of complications that these (and most other government corporations) face in mandated service, price regulation and other government-defined obligations.
As theoretically constituted, the public option proposal would be free of many of these weights tied to other government service corporations. But it seems overly optimistic to think that the public option would work perfectly given the nature of our political system. Yglesias does acknowledge the temptation, given the CBO's current 10-year budget window, for politicians to hand out other goodies. Many conservatives would say that this temptation will be overwhelming. [# More #]
Let's say that it turns out that those critics on the Right are right in this case and the public option does become a budget boondoggle. Will there be enough of a political push for a reform? Considering the current problems the political system is having with controlling Medicare costs, it would be incredibly difficult. The public option will create a new political constituency and all that entails (interested in gaining more benefits for themselves and set against controlling costs that they don't bear). Would it be impossible to control costs or reform a public option gone wrong? No. The public option would be the highest profile and most impactful program of its kind, which may result in a remarkable political movement for reform. However, the political inertia once the program is in place would be very, very high.
What are the chances that the public option does spiral out of control due to political favors, new constituent power and failure to control health care costs? The probability seems pretty high. It may be that everything has to go right if a public option is to stay budget-neutral.
Postscript: This is to put aside the traditional conservative criticisms of the post office and Amtrak, which is another can of worms. Also, I should mention that my biggest problem with the developing health care legislation is not the public option. But the public option provision is something that is... well, not great.